New Brunswick Court of Appeal refuses to award lost wages during lay-off period before termination

Worker placed on 'furlough', not paid for five months before being fired

New Brunswick Court of Appeal refuses to award lost wages during lay-off period before termination

The New Brunswick Court of Appeal has rejected a dismissed employee’s assertion that his unjustified lay-off during the COVID-19 pandemic entitled him to damages, both for lost wages during the lay-off period and for wrongful dismissal arising from his subsequent termination.

In Donovan v. Richelieu Hardware Ltd., 2022 NBCA 45, Hardware company Richelieu Hardware Ltd. temporarily laid off 11 employees in its Moncton division in March 2020, at the start of the COVID-19 outbreak. The company told the appellant, one of the division’s sales representatives, that he was being placed on “furlough,” that he should stop reporting for work after Apr. 1, and that he would not receive compensation. However, the employee health insurance program still covered him.

On Sept. 2, 2020, the company notified him in writing that it was immediately terminating his employment and offered four weeks’ pay from that date in lieu of notice of termination. He filed an action seeking damages for:

  • wrongful dismissal, arising from his termination on Sept. 2, 2020
  • lost wages between April and August 2020, on the ground that his furlough breached his employment contract but did not terminate the contract.

He then brought a motion for summary judgment. The motion judge found that the company was not entitled to furlough or lay off the appellant, that it constructively dismissed him as of April 2020, and that he should receive 12 months’ pay in lieu of notice from Apr. 1, 2020. The appellant appealed.

Appeal allowed only relating to pre-judgment interest

First, the Court of Appeal agreed with the motion judge’s rejection of the lost wages claim during the furlough period in addition to the wrongful dismissal claim. The judge clearly recognized both of the appellant’s distinct claims and did not overlook or misapprehend his lost wages claim, which was a central issue at the hearing for the summary judgment motion, said the appellate court.

The motion judge appropriately saw no legal basis to justify the claim for lost wages, the appellate court ruled. The judge found no authority, including in the cases that the appellant cited, backing his lost wages claim.

Second, the appellate court rejected the appellant’s argument seeking to extend the 12-month reasonable notice period by five months to account for the time he was laid off, finding that the motion judge made no errors in determining the period of reasonable notice.

The appellate court noted that the company’s decision to place the appellant on furlough without pay put him in a very difficult position and gave him the option to treat the layoff as a constructive dismissal. The appellant chose to wait and hoped to resume his work despite knowing, before his termination, that not all of those who were laid off would return to work.

Lastly, regarding the appellant’s request for pre-judgement interest, the appellate court awarded interest at seven percent – the rate that New Brunswick‘s Rules of Court prescribed – from Nov. 1, 2020 until judgment. Nov. 1, 2020 was the midpoint between the company’s breach of the employment contract and the end of the 12-month reasonable notice period.

The appellate court found no basis to deny pre-judgment interest and said that it was simply an oversight that this request was not addressed. The motion judge’s reasons for decision did not include any findings that would prevent an award of pre-judgment interest, the appellate court said.

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